Weekly Global Update for August 21, 2013 | TTI, Inc.


European June Data

Business conditions in parts of Europe are improving:

  • The EU27 Manufacturing Purchasing Managers Index leading indicator (PMI) rose in July to its highest level since July 2011 (Chart 1) driven by a strong rebound in Germany (Chart 2).
  • June EU27 electronic equipment production improved (Chart 3) and although the 12/12 (annualized) and 3/12 (2Q’13 vs. 2Q’12) growth rates are still below 1.0 (indicating contraction versus same period last year), they appear to reached their low point in this business cycle (Chart 4) and should soon begin to climb toward 1.0 (real year/year growth).
  • Europe’s automotive (Chart 5) and aerospace (Chart 6) production have surged recently.
  • Instruments and appliances for measuring, testing and navigation (Chart 7) and irradiation, electromedical and electrotherapeutic equipment (Chart 8) saw sales improve sequentially from May.
  • Semiconductor shipments to Europe are in balance with electronic equipment on a 3/12 growth basis (Chart 9). No over ordering or inventory building of chips is apparent.
  • Loaded electronic board (electronic assembly) production declined slightly (Chart 10) but wiring device (PCB) sales increased from May to June (Chart 11).
  • Europe’s PMI leading indicator now points to further growth in Europe’s PCB industry (Chart 12).


Chart 13 summarizes 2Q’13 versus 2Q’12 growth for the European electronics supply chain. Many sectors were still in negative territory but things are improving.

Sources: Eurostat and SIA

European Semiconductor Distribution Market sales in Q2/CY13 grew by 2.6% to 1.51 Billion Euro compared to Q2/CY12 (Charts 14 & 15).

Q2/CY13 ends 2.6% higher than Q2/CY12. Further sequential growth in all regions except Germany and UK. Strong gains in Italy and Eastern Europe.

London, August 12, 2013 the European semiconductor distribution market currently seems to be getting out of a two year trough. According to DMASS (Distributors' and Manufacturers' Association of Semiconductor Specialists), sales in Q2/CY13 grew by 2.6% to 1.51 billion euro compared to Q2/CY12. The first half of 2013 ended with sales of three billion euro, which represents a slight decrease of 1.4%.

Georg Steinberger, chairman of DMASS, commented on the results: "As expected, the improvement on the booking side since Q4/CY12 materializes now in the form of higher revenues, so that the market has slightly turned toward a positive trend. However, we should be careful to over-interpret the market conditions, as bookings are just slightly higher than billings. With China as one key economy softening, the trend could turn easily. Nevertheless, I am cautiously optimistic that 2013 will remain positive."

Regionally, in a Q2/Q2 comparison, if it were not for the UK (-4.9%) and especially Germany (-2.8%), the quarter would have turned out even more positively. DMASS reported for Germany total sales of 462 Million Euro and for the UK 122 Million Euro. France grew moderately (+4.4% to 117 million euro), Italy surprisingly strong (+10.3% to 155 million euro), Nordic went up by 11.2% to 154 million euro (despite a massive production shift out of the region) and Eastern Europe further strengthened its critical mass with 167 million euro (+11%).

Georg Steinberger: "Reading the newspaper, you would expect the opposite, but the fact is that Germany still shows signs of weakness in semiconductor demand and Italy firmly secures its second position as a single market within Europe."

At the product detail level, all major segments except Programmable Logic and Discretes were positive in Q2/CY13. Programmable Logic declined by 13.6% to 125 Million Euro, Discretes by 5.5% to 77 Million Euro. Other Logic (14.4% to 85 million euro) and Sensors (10.7% to 35 million euro) grew double-digit, the rest ended between 1.9% and 6.1%. The major segments Analog, MOS Micro and Opto showed above average recovery, Analog to 428 million euro (+3.6%), MOS Micro to 315 million euro (6.1%) and Opto to 142 million euro (6.1%).

Georg Steinberger: "Major product segments which are typical for distribution remained stable. Exceptions like Programmable Logic and to a lesser extent RF Discretes are of lesser concern to the whole DMASS community, but more so to the major contenders in that area. Other high end key technologies on the other side (32-Bit MCUs and High-Brightness LEDs) showed over-proportional growth, which proves for me that distribution increasingly drives more complex projects."

Sources: http://dmass.com

Custer Comment: DMASS growth is "in sync” with European electronic equipment production and SIA semiconductor shipments to Europe on a 3/12 growth basis. SEMI equipment shipments are much more volatile (Chart 16).

Global IC Foundry Output Likely to Contract in 4Q’13 on Inventory Correction (Chart 17)

Output value for the global semiconductor foundry industry will likely register a sequential decrease in the fourth quarter of 2013, following three straight quarters of growth, due to inventory digestion throughout the semiconductor industry supply chain, according to Digitimes Research.

Inventory among the global major IC suppliers has risen above normal levels again since the second quarter of 2013, and is expect to continue growing in the third quarter. The industry previously worked through excessive inventory in the fourth quarter of 2012 and the first quarter of 2013, after having seen inventory climb to a record US$16.53 billion in third-quarter 2012, said Digitimes Research.

Disappointing shipments of high-end smartphones, and China's economic slowdown, have caused excessive chip inventory levels, Digitimes Research indicated. The semiconductor industry is set to undergo an inventory correction in the fourth quarter, Digitimes Research said.

In addition, Digitimes Research predicts that the global IC foundry sector will grow 14.9% in output value in 2013, while output value for the overall semiconductor industry will increase by a smaller 4%.

Sources: www.digitimes.com

U.S. and Global Industrial Production Growth

U.S. industrial production (Chart 18) was almost unchanged in July as a decline in manufacturing output and utilities counteracted an uptick in mining activity.

www.federalreserve.gov/releases/g17/table1_2.htm

Globally results remain mixed per Chart 19.

Sources: www.economist.com

Smartphone Sales Grew 46.5% in 2Q’13 and Exceeded Feature Phone Sales for First Time (Charts 20-24)

  • Worldwide mobile phone sales grew 3.6% in 2Q’13
  • Microsoft become number three Smartphone OS overtaking BlackBerry


Worldwide mobile phone sales to end users totaled 435 million units in the second quarter of 2013, an increase of 3.6% from the same period last year, according to Gartner, Inc. Worldwide smartphone sales to end users reached 225 million units, up 46.5% from the second quarter of 2012. Sales of feature phones to end users totaled 210 million units and declined 21% year-over-year.

"Smartphones accounted for 51.8% of mobile phone sales in the second quarter of 2013, resulting in smartphone sales surpassing feature phone sales for the first time,” said Anshul Gupta, principal research analyst at Gartner. Asia/Pacific, Latin America and Eastern Europe exhibited the highest smartphone growth rates of 74.1%, 55.7% and 31.6% respectively, as smartphone sales grew in all regions.

Samsung maintained the number one position in the global smartphone market, as its share of smartphone sales reached 31.7%, up from 29.7% in the second quarter of 2012. Apple’s smartphone sales reached 32 million units in the second quarter of 2013, up 10.2% from a year ago.

In the smartphone operating system (OS) market Microsoft took over BlackBerry for the first time, taking the number three spot with 3.3% market share in the second quarter of 2013. "While Microsoft has managed to increase share and volume in the quarter, Microsoft should continue to focus on growing interest from app developers to help grow its appeal among users,” said Gupta. Android continued to increase its lead, garnering 79% of the market in the second quarter.

"With second quarter of 2013 sales broadly on track, we see little need to adjust our expectations for worldwide mobile phone sales forecast to total 1.82 billion units this year. Flagship devices brought to market in time for the holidays, and the continued price reduction of smartphones will drive consumer adoption in the second half of the year,” said Gupta.

Metal Prices Increase (Charts 25-28)

Silver rose to almost $23 and gold to $1370 per troy ounce by August 15, 2013.

Precious metal prices have recovered in recent weeks as the U.S. Fed dialogue suggested tapering plans could be delayed and renewed violence in Egypt increased the appeal for safe haven assets.

Walt D. Custer


Walt Custer

Walt Custer is an industry analyst focused on the global electronics industry. Prior to forming Custer Consulting Group he was Vice President of Marketing and Sales for Morton Electronic Materials, a global supplier of specialty chemicals and process equipment for the PCB industry.

Custer has been a member of the IPC trade organization since 1975 where he received both the President's and the Raymond E. Pritchard Hall of Fame Awards. He is currently a member of the IPC Executive Market & Technology Steering Committee. Custer is also a Director of the EIPC European PCB trade organization.

He authors regular “Market Outlook” columns for Global SMT & Packaging magazine, the Journal of the HKPCA and the TTI MarketEYE website. View other posts from Walt D. Custer.

 

Statements of fact and or opinions expressed in MarketEYE by its contributors are the responsibility of the authors alone and do not imply an opinion of the officers or the representatives of TTI, Inc.

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